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  Trouble in Timeshare Paradise

Learn how to avoid common and costly pitfalls. And find out why timeshare 'exit' companies may be nothing more than scams.

 

It had been several years since Corinne Adams, 83, last visited the timeshare in Hawaii that she and her late husband purchased almost three decades ago. At more than $600, the annual maintenance fee was an unnecessary expense, and Adams, a grandmother from Olympia, Wash., worried about burdening her adult children with a property they didn’t want to inherit. So, she says, when she got a call from a woman representing Pro Timeshare Resales saying that she had several possible buyers lined up, she was receptive.

Adams says the caller explained that the company would find a buyer and take care of the paperwork. All Adams had to do was pay an upfront fee of $1,528. More than two years and nearly $10,000 later, Pro Timeshare had still failed to deliver a buyer, according to Adams, who gave testimony in a lawsuit against the company filed by the Federal Trade Commission in 2016.

“They were so persuasive; they always had someone about to sign,” she says. “But every few months they’d come back saying they needed a little more time, and more money.”

Adams, it turns out, was just one of thousands of consumers Pro Timeshare had defrauded. An FTC investigation found that the company had collected more than $18 million from consumers without facilitating a single sale. (In October 2019, the FTC began issuing partial refunds to Adams and others.)

Although the FTC lawsuit led to a court settlement that permanently shut down Pro Timeshare in 2018, there are many other timeshare exit companies like it. They especially target older owners like Adams, who are desperate to get out of timeshares they no longer want or can no longer afford.

“These companies know there is a vulnerable population of people to prey upon,” says Michelle Corey, president and CEO of the St. Louis Better Business Bureau. Its own investigation found 10 Springfield-area companies that, the BBB says, bilked 356 customers out of $2.2 million for services that were never delivered or completed.

Even business-savvy people can get reeled in by the questionable claims these companies make. Solomon Choi, a 39-year-old New York entrepreneur and founder of the 16 Handles frozen yogurt chain, turned to an exit company he found online six years after he purchased a Las Vegas timeshare, when the annual maintenance fee soared to more than $2,000.

“I thought I could really be stuck with this for life,” Choi says of the timeshare he bought during a free weekend trip to Las Vegas offered by the company in return for sitting through a mandatory sales pitch.

Months later, Choi learned that the exit company had gone bankrupt. He has paid $11,200 to a second firm that took over his case—and is still waiting to learn when it will be able to release him from his timeshare.

Not All Fun in the Sun

More than 9 million U.S. households own some type of timeshare, according to estimates from the American Resort Development Association (ARDA), which represents the timeshare industry. These can be a stake in a property that entitles the owner to use it for a defined period of time or a points-based program that offers more flexibility.

Timeshares combine resort-style amenities with accommodations that usually feature a kitchen and two or more bedrooms. Hilton Grand Vacations and Marriott Vacations Worldwide report that in 2018, sales worldwide were up 10.6 percent and 8 percent, respectively. ARDA says its surveys show that 85 percent of timeshare owners characterize their experience as good, very good, or excellent.

Still, a timeshare can be difficult to unload, in part because of a lack of demand for older ones on the resale market. The going rate on the Timeshare Users Group, where “used” timeshares are listed for sale, is about 10 percent or less of the original purchase price, according to Brian Rogers, who manages the website.

“It is virtually impossible to sell most timeshares for the price you paid,” says Brian McDowell, a lawyer and partner with the firm Holland & Knight, who played a key role in the FTC case against Pro Timeshare.

Rising maintenance costs are helping to fuel the timeshare exit business, according to Gideon Sinasohn, an FTC attorney who filed the case against Pro Timeshare. “As these properties age, the costs of maintaining them go up,” he says. The fee increases are usually kept to less than 5 percent a year, but that can add up quickly over time.

Seller Beware

There are two types of exit companies: resale firms, which claim they can sell your timeshare, and relief companies, which promise to release you from your contract and annual maintenance bills. Some do what they say. (Corinne Adams found a release company that successfully got her out of her timeshare last year.) But scammers abound, according to the FTC and the Better Business Bureau. So how can you tell them apart?

“Demanding a large fee in advance is a huge red flag,” Sinasohn says. Another is if a company claims to be a law firm or says it works closely with lawyers but doesn’t identify them. (Be sure to check out the bona fides of any licensed attorneys who are involved.)

Rogers says that in most cases he’s aware of, clients of these companies never receive the promised service, or they pay a substantial sum for something they could have done themselves for far less money.

Making a Graceful Exit

As part of a 2016 settlement with the state of Arizona on behalf of disgruntled timeshare owners, Diamond Resorts, a timeshare company with 380 affiliated resorts in 33 states and 32 countries, established a program that allows certain consumers to relinquish fully paid but unwanted timeshares with no further obligations. Marriott Vacations Worldwide, Club Wyndham, and other timeshare companies have also made it easier for owners to do the same thing, says Robert Clements, general counsel for ARDA, which has created a guide to legitimate exit strategies (at responsibleexit.com). But for consumers who feel chained to their timeshare by a contract they can’t break, there are strategies to help you part ways.

Ask the corporate owner about a deed-back program. As noted, some operators will now help owners unload their shares, but you may be on the hook for maintenance fees while they seek to resell the unit.

Sell it or give it away on an open forum. Numerous online forums and websites exist for owners seeking buyers for their shares. Among the most active is eBay, where the keyword “timeshare” will turn up hundreds of listings. You can also find them on Craigslist, the Timeshare Users Group, and RedWeek. Be sure to hire an attorney to prepare (or at least review) all paperwork related to the transaction and, given the weakness of the secondary market, be prepared to take a significant loss. But at the very least, you’ll get closure.

Suspend maintenance payments. Though it’s not a recommended strategy, you could stop making these payments as a last resort. Doing so could lead to foreclosure, damaging your credit score for up to seven years, and possible legal action, but some owners may find this approach to be the lesser of two evils.

Barbara Prideaux, 80, of St. Louis says she and her late husband let their timeshare go into foreclosure after a Missouri relief company they hired failed to get them released from their deed. “Our children never used the timeshare, and the fees just got to be too much,” Prideaux says. “I wasn’t happy about doing it this way, but we are moving on with our lives.”

 
What to Know Before Buying a Timeshare
 

Timeshares, also known as “vacation ownership plans,” have evolved since they were first marketed in the 1960s and ’70s, commonly as a fixed week at a specific resort. Today there are also “floating week” timeshares that let you pick different weeks each year and points-based plans that let you book stays of varying lengths at different resorts, among other types. Established names, including Disney, Hilton, Marriott, and Wyndham, sell timeshares, but all vacation ownership plans come with a unique set of concerns. Keep these things in mind.

 

Weigh the Costs

The average price of a new timeshare is $21,455, which buys you the use of a property for one week each year, according to a recent survey by the American Resort Development Association (ARDA). You can pay a fraction of the purchase price of a new timeshare by buying one secondhand on websites like eBay or on dedicated timeshare sites such as RedWeek and the Timeshare Users Group. Annual maintenance fees average $1,000, according to ARDA, but can climb to more than $3,000. Timeshares don’t appreciate in value, but if you hold on to one long enough—at least 13 years, according to a 2016 Consumer Reports estimate—you can begin to save on what you would have spent taking similar vacations on your own.

 

Consider the Hassle Factor

If you buy a floating week timeshare, you may have to reserve your vacation nine to 12 months in advance to get a desirable location. Points-only plans offer the most flexibility; you can vary both the length of the stay and the locale. But planning is essential to getting your money’s worth. And if you bought a timeshare because it was cheap in the hope of swapping it for stays at nicer properties (via membership platforms like RCI), you may be out of luck. If you’re not thrilled about staying there, you probably won’t get many takers.

 

Avoid an Impulse Buy

Many timeshares are bought by people on vacation. There may be a brief window of as many as 15 days to back out, depending on the state. Arizona recently increased its window to 10 days while also requiring sellers to more clearly disclose the nature of the purchase. Always insist on time to think it over, away from the piña colada parties.